T-Mobile in talks to acquire MetroPCS

If fourth, fifth biggest carriers do merge, they'd still be smaller than Sprint.

On Tuesday, Deutsche Telekom, the parent company of T-Mobile USA, told the Associated Press that it is currently in talks to acquire MetroPCS, the country’s fifth biggest mobile carrier.

If the deal goes through, it would add 9.3 million subscribers to T-Mobile’s 33.2 million. The combined companies would still trail the third largest telecom company in the US, Sprint.

"A combined T-Mobile and MetroPCS would still be smaller than any of the bigger players (Sprint, AT&T, Verizon) [but] this does not fundamentally change the mobile operator landscape," said Brian Blau, a Gartner analyst. "[It’s] interesting in that the field becomes less crowded and the combined T-Mobile and MetroPCS could better compete given a stronger customer base."

Last year, AT&T attempted to buy T-Mobile USA, but that deal later collapsed after regulatory concerns.

A complication to a potential T-Mobile/MetroPCS deal could be the fact that MetroPCS currently uses CDMA, while T-Mobile USA only uses GSM, so their networks remain, for the moment, incompatible. However, both companies are currently upgrading to the same LTE bands.

Still, not everyone in the industry is convinced that even a combined fourth-and-fifth carrier would add serious competition in the American mobile market.

"A combination of two subscale struggling competitors will not result in a credible long-term competitor," said Kevin Smithen, an analyst at Macquarie Securities, in an interview with the AP.

55 Reader Comments

I know that all data points indicate that the suckiness of wireless carriers is directly proportional with their growth, but in this case I'd like to see T-Mobile (who I currently view as neutral) remain strong.

It's a shame the deal doesn't come with a convenient bucket of existing GSM spectrum, but at least it's not as bad as when Sprint bought Nextel's bag of snakes.

The difference wireless technology isn't important. If the merger goes through cdma customers will only represent 25% of the userbase. I think metro has 1 million LTE customers and VoLTE is already running on their network. All T-Mobile has to do is give non-lte metro customers a free gsm/lte devices and reuse the cdma spectrum for lte.

I know that all data points indicate that the suckiness of wireless carriers is directly proportional with their growth, but in this case I'd like to see T-Mobile (who I currently view as neutral) remain strong.

It's a shame the deal doesn't come with a convenient bucket of existing GSM spectrum, but at least it's not as bad as when Sprint bought Nextel's bag of snakes.

Well, that bag of snakes has yielded 14Mhz of 800Mhz spectrum, 10Mhz of PCS spectrum and the EBS/BRS spectrum that Clearwire is using. It was a painful transition and Sprint did not handle it very well, but it is finally coming into use.

One of the main reasons why Nextel's been a bleeding wound on Sprints books for so long was that they were unable to replicate the push-to-connect feature effectively on CDMA. TMobile won't be inheriting any intractable legacy requirements if they swallow MetroPCS. The only question would be if they'd take the loss of having to replace customer handsets with their own funds to do a quick refarming of the CMDA spectrum, or wait 3-4 years without launching any new CDMA phones to allow most of the legacy devices to be replaced as normal life cycle upgrades.

Don't the naysayers ever get tired of being negative? It doesn't have to be "serious competition" (however that nebulous term is defined by those uttering it).

Any competition to the larger carriers is welcome. A smaller competitor presents the possibility of providing some disruption to the larger carriers in terms of their approach to service. It also presents the possibility of actual innovation.

Full disclosure: I'm a pretty satisfied T-Mobile prepaid customer. Their 3G rollout in the Bay Area seems to be coming along very nicely. I'm seeing it more frequently each day.

if they also merge with US Cellular, which doesn't seem to have much overlap in metroPCS's markets and is also CDMA like MetroPCS, they'd have 48million subscribers, which is just shy of Sprint's 53million users. http://en.wikipedia.org/wiki/Us_cellular

Meh, it would be better to see Leap (Cricket) and MetroPCS tie up. They could team up to form a 5th nationwide carrier. The problem is that even then they probably wouldn't have a whole lot of spectrum free for LTE. With T-Mo, they essentially give everyone GSM phones and then harvest all MetroPCS's PCS and AWS spectrum for HSPA+ and LTE, respectively.

MrbLOB9000 wrote:

Hoos wrote:

Full disclosure: I'm a pretty satisfied T-Mobile prepaid customer. Their 3G rollout in the Bay Area seems to be coming along very nicely. I'm seeing it more frequently each day.

They don't have 3G already?!

I'm assuming Hoos meant the PCS refarming from 2G/Edge to 3G/HSPA (e.g. so that iPhones can get 3G/HSPA). T-Mo is supposed to be on track to have all that done by the end of this year, and then in the first half of next year they'll have LTE up in the cities where they plan to launch it.

I'm not really sure this makes sense IMO. Combining a GSM carrier and a CDMA carrier is not a simple proposition. Especially when you are talking a prepaid focused CDMA carrier so you don't even have the natural 2 year upgrade cycle to get people to new GSM phones. Acquiring a Prepaid carrier for its users seems like a pretty poor idea as they aren't under any sort of contract. Acquiring them for their spectrum licenses seems troublesome when they are using an incompatible standard and using it efficiently would require replacing all their users phones.

At this point I think t-mobile's money is better spent continuing to work on their refarm they've already started to get better handset support (including iPhones on 3g/4g) and starting their own LTE deployment. Between the AT&T spectrum from the failed buyout and the spectrum bribe they got to support the Verizon spectrum purchase they've already got an nice little bit of additional spectrum to make their refarm and LTE deployment viable.

if they also merge with US Cellular, which doesn't seem to have much overlap in metroPCS's markets and is also CDMA like MetroPCS, they'd have 48million subscribers, which is just shy of Sprint's 53million users. http://en.wikipedia.org/wiki/Us_cellular

I hope this goes through, and that it makes T-Mo stronger. T-Mo is the only phone company I can stand, to be honest.

A piece of unsolicited advice: throw out MetroPCS's entire lineup of phones. Replace them exclusively with "worldphones". That way, you can pull the plug on the CDMA network in a few years' time and use that spectrum for LTE.

Acquiring a Prepaid carrier for its users seems like a pretty poor idea as they aren't under any sort of contract

Prepaid users do not have contracts for many reasons.

#1 reason being that they do not have to sign a contract. #2 being bad credit. #3 being they already owe AT&T/Sprint/Verizon $1,000.#4 can't budget a phone bill

Maybe I got the order wrong.

#1 all the way. We (generically speaking) bought into the subsidized phone/expensive plan programs without a lot of fuss. I'd prefer paying what my phone is worth then choosing which carrier I want based on availability of service and pricing (in, more or less that order).

I finally got fed up with being locked into two years for a phone that won't get OS upgrades (other, semi-unrelated experience with Sprint and Android).

While I've happily done the 2-year contract plan since the early 90s, I'm much happier with an unlocked phone that allows me a little more freedom to switch carriers or quit when ever I want.

The CDMA to GSM transition might not be as painful as one might think. The Verizon/Alltel acquisition involved a deal with the feds that resulted in customers in many rural areas being moved from Alltel to AT&T (http://www.att.com/mergers/alltel/about-the-merger.jsp) and, while the transition was anything but painless (I switched to Verizon in the process), hundreds of thousands (probably at least a million?) customers made the jump successfully. Customers on contract got free GSM phones "comparable" to their old ones, but everyone I know replaced theirs with something actually decent at subsidized prices.

Acquiring a Prepaid carrier for its users seems like a pretty poor idea as they aren't under any sort of contract

Prepaid users do not have contracts for many reasons.

#1 reason being that they do not have to sign a contract. #2 being bad credit. #3 being they already owe AT&T/Sprint/Verizon $1,000.#4 can't budget a phone bill

Maybe I got the order wrong.

That's plausible, but also illustrates what's wrong with almost every other carrier outside of AT&T and Verizon. You're selling to either the extreme high or low ends of the market (e.g, The newest unlocked Android flagship or cheap prepaid feature phones)

To address your points:

1. Why do people treat cell phone contracts like the plague? In some cases, this is the only phone they have (no landlines), so spending money on a plan with more features/data makes complete sense.

2. If that's true and I was in T-Mobile's position, I would say go to one of the pre-paids, we don't want or can't take the risk on you.

3. I don't see this happening. Most people have the sense to not pay ETFs because the cost is so high.

4. Again, people need a phone. If this is true, how do the prepaid guys make enough to stay in business?

if they also merge with US Cellular, which doesn't seem to have much overlap in metroPCS's markets and is also CDMA like MetroPCS, they'd have 48million subscribers, which is just shy of Sprint's 53million users. http://en.wikipedia.org/wiki/Us_cellular

Except USC has like two regions with LTE coverage...

Making it even easier to fold USC into MetroPCS and less technology switching from one band to another or device switches. It'd be more about increasing userbase vs. acquiring technology or infrastructure.

The CDMA to GSM transition might not be as painful as one might think.

It probably wouldn't be a transition from CDMA to GSM, but CDMA to LTE, along with Tmobile's current customers transitioning from GSM to LTE. It's not going to happen overnight (unless they push it), but they would have converged on the same tech in a couple of years anyway.

That said, even MetroPCS roams on Sprint and Leap, and is arguably a better performer in-market than some competitors (again, Sprint) while offering the same services for a fraction of the cost.

This is getting a little off topic, but MetroPCS doesn't give unlimited roaming, do they? Last I checked, they charged 19 cents a minute for voice roaming, and I'm not even sure if they offer data roaming. Of course, that can all change with the merger...

I'm surprised at the number of people who dismiss Tmo so easily. Do they have really spotty coverage in other places? I've used it in CT, IL, and otherplaces both in the east and midwest, and have had good service with generally fast transfer speeds for data. I know they're supposed to have even better coverage on the west coast. I get 5GB/month, unlimited text, wifi hotspot for $65/month and have a nexus phone. When I priced out similar plans on ATT or Verizon, they were $120 to $150/month (the tethering is REALLY expensive for them) and generally still didn't match all the features.

Aww, I just left MetroPCS for T-Mobile. Metro's coverage, voice quality, and data speeds were all poor.

In central FL all I heard was every user of theirs said the service sucks and would move on if they could. I expect service in a dense city to be decent.

I know service in the middle of nowhere will be like slow 2G for most of Tmob but it is something, and it runs Pandora most of the time (just traveled 3000 miles around the country, from FL to LA to various states like MS, IL, TN, AL, MS).

I'm surprised at the number of people who dismiss Tmo so easily. Do they have really spotty coverage in other places? I've used it in CT, IL, and otherplaces both in the east and midwest, and have had good service with generally fast transfer speeds for data. I know they're supposed to have even better coverage on the west coast. I get 5GB/month, unlimited text, wifi hotspot for $65/month and have a nexus phone. When I priced out similar plans on ATT or Verizon, they were $120 to $150/month (the tethering is REALLY expensive for them) and generally still didn't match all the features.

Why are people still using Verizon/ATT?

To be honest, T-Mobile DOES seem to have SLIGHTLY worse service outside of major cities, but is that enough to get me to pay 20 bucks more per month for AT&T or Verizon? No way.